Consider Digital Transformation as a Value Generator

Everywhere you look now there seems to be reports, events and discussions about the “digitisation of procurement data” and the 'digitalisaton of procurement processes' and 'digital transformation' in general. So, for the sake of clarity, we have dedicated one of our briefing papers, written by Peter Smith and sponsored by independent spend management solutions provider, Jaggaer,  to the definition of these terms which seem to be used quite loosley.

The paper also looks at five key points (such as the central importance of data) relating to digital procurement transformation. Assuming procurement executives take the positive approach, we suggest these are well worth considering as plans are developed and implemented.

Here is Point 5 to give you an idea of what's in the report:

Consider Digital Transformation as a Value Generator

Some of the most extreme examples of digital transformation have seen whole industries disrupted, with new business models threatening the very survival of existing players. It is interesting to note that many of these rely on partnerships and commercial relationships that share some key aspects of our procurement activities and challenges.

So, if we look at new business models, such as Uber or Deliveroo, we might ask whether the restaurants that work with Deliveroo are “suppliers.” Not in a traditional sense certainly, but they certainly are “commercial partners.” Are Uber drivers actually “staff” or contingent workers, or business partners? Are musical artists and record labels “suppliers” to Spotify? Again, these definitions are becoming blurred, but entirely new industries and business models are springing up, enabled by digital transformation.

Procurement professionals and functions have a choice here. We can look at this and simply decide it is not our own area of expertise, it is not what we have seen in the last 50 years as “procurement,” and we can leave it to someone else. Or we can look at these new commercial models and realise that they in the main involve the identification of business partners, negotiation and structuring of commercial and contractual relationships, performance management, collaboration and relationship management … all issues that procurement already considers, at least in our more strategic work.

We should therefore be well placed with the procurement skill-set to help our organisations investigate, develop and implement new business models and ventures based around digital transformation, particularly when they involve third parties – which most inevitably will. It comes back to seeing interaction with external organisations as having the potential for value generation, and the role of procurement as supporting that, rather than the old model, which put cost reduction at the top of the procurement priority list.

(Download the whole report to read about all five recommendations and our final conclusions).

And it is worth noting that this paper draws heavily on a very good and detailed 2017 report from Jaggaer, Just Hype Or The New Standard? - A Study Based on the Complete Results of the Global JAGGAER Digital Procurement Survey”.

This year, Jaggaer has launched an updated survey which asks the question: How digital is your procurement organisation? It is an expedition to discover How Close We Are to reaching that holy grail of ‘procurement digital transformation.’ You can read about that here.

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